Part ll.

REAL PROPERTY TAXATION

Chapter 1

REAL PROPERTY TAXATION,IN GENERAL

A. Introduction

1. Constitutional underpinnings of real property

taxation. Local govemment real property taxation also

has constituticnal underpinnings,based on Secton 5 of

Article X of the Constituton thatcannot simply be

ignored.

The power to tax is an incident of sovereignty and is

unlimited in its magnitude, acknowledging in its very nature

no penmeter so that secunty against its abuse is to be

found only in the responsibility of the legislature which

imposes the tax on the consttuency who are to pay for it.

The rght of local govemment units to cellect taxes due

must always be upheld to avoid severe tax erosion.This

consideration is consistent with the State policy to

guarantee the aulonomy of local governments and the

objective of the Local Government Code that they enjoy

genuine and meaningful local autonomy to empower them

to achieve their fullest development as self-reliant

communites and make them effective partners in the

attainment of national goals.

In condlusion,it is reiterated tnat the power to tax is

the most potent instrument to raise the needed revenues to

fnance and Support myniad activiles of the local

govemment units for the delvery ef basic services

essential to the prometion of the general welfare and the

enhancement of peace, progress.and prospenty of the

people.

Let us be reminded of the other side of the coin in

tenms of concems and protection of interests.A local

govemment unit has no less than its own constitutional

interests lo prolect in pursuing this case. These are

interests that the Supreme Court must also be sensitive to

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and has taken into account in making decisions (National

Pewer Corporation v. Central Board ol Assessment Appeals.et al,G.

RNo 171470,January 30.2009 cong FELS Energy.Inc. v. The

Prvrce of Batangas,GR. No.168557,February 16,2007,516 SCRA

86,involving real property taxation.

2 Fundamental

principles.

＂Fundamental

Principles.·The appraisal,assessment, levy and

collection of real property tax shall be guided by the

following fundamental principles:

（a)Real property shall be appraised at its current

and fair market value;

（b) Real property shall be classified for assessment

purposes on the basis of its actual use;

（c)Real property shall be assessed on the basis of

uniform classification within each local govemment

unit;

（d) Te appraisal,assessment,levy and coliection

of real property tax shall not be let to any private

person;and

（e) The appraisal and assessment of real property

shall be equitable.”（LGC,Sec.198)

2. Summary outline of fundamental principles of

appraisal, assessment, levy and collection of real

property taxes.

1) Appreisal at current and fair market value;

2) classification for assessment on the basis of actual

use:

3)

assessment on the basis of uniform classification:

4) appraisal,assessment,levy and collection shall not

be let to private person;and

5) appraisal and 2ssessment shall be equitable.(LGC,

Sec 198,arrangement and numbering supplied)

3. Functions of the Bureau of Local Government

Finance (BGLF) under the Department of Finance

The Bureau of Local Government Finance,which shall be

headed by and subject to the supervision and control of an

Executive Director who shall be appointed by the President

upon the recommendation of the Secretary,shall have the

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following functions

（1)

Assist in the fomulation and implementation of

policies.on local govemment revenue administration and

fund management,

（2)

Exercise
administrative

and

technical

Supervision and coordination over the treasury and

assessment operations of local governments:

（3)

Develop and promote plans and programs for

the improvement of resource management systems,

collection enforcement mechanisms, and credit utilization

schemes at the local levels;

（4)

Provide consultative services and technical

assistance to the local govemments and the general public

on local taxation,real property assessment and other

related matters:

（5)

Exercise line supervision over its Regional

Offices/ field units within the Department Regicnal

Administrative Coordination Office and the Local Treasury

and Assessment Services,and

（6)

Perfom such other appropnate functions as

may be assigned by the Secretary or Undersecretary for

Donestic Operations. (Executve Order No 292. The

Administratve Code of 1987",Book V.Tde ll,Chapter 4.Secton 33)

a.

Bureau of Local Government Finance (BGLF)

under the Department of Finance has no authority

to rule on claims for exemption from the realty tax.

（Digtal Telecommuncatons Philppnes,Inc v Cty Govemment cf

Balangas.elc.et al.G.R No 156040.December 11.2008 citng

Secton 33,Chapter 4,Tdle II.Book IV of Executve Order No 292 or

＂Tne Admnstratve Code of 1987)

b..Findings of the Bureau of Local Government

Finance (BLGF) of the Department of Finance are

not conclusive upon courts. The BLGF is not an

administrative agency whose findings on questions of fact

are given weight and deference in the couts The BLGF

was created merely to provide consultative services and

technical assistance to local govemments and the general

public on local taxation,real property assessment,and other

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ated matters,among others.The question raised is a

al question,to wit,the interpretation of Sec. 23 of R.A.

No.7925.There is,therefore,no basis for claiming expertise

er the BLGF that administrative agencies are said to

pcssess in their respective fields.(Smert Commurications,Ine.

he Cty cf Davao,etc,et ei,G.R.No.155491,September 16,2008)

ESSAY QUESTIONS:

1) State at least three (3)besic princip!es that should

N followed in the appraisal and assessment cf raal

prcperties for taxation purpose.(BAR:1984)

2) Give at least two(2)fundamental principles goveming

mal property taxation, which aro Imitations on the taxing

power of local govenments insofar as the levying of the

malty tax is concemed,(BAR:2000)

WULTIPLE CHOICE QUESTION:

The appaisal,assessment,levy and collection of real

property tax shall be guided by the following principles.

Which stztement does NOT belong here?

2. Real property shall be appraised at its current and

bar market value:

b. Real property shall be classified for assessment

purposes on the basis.of its actual use:

c. Real property shall be 2ssessed on the basis of a

unfonm classificztion within each local political subdivision;

d. The appraisal and assessment of real property shall

te based on audited financizl statements of the owner.(BAR.

2012)

SUGGESTED ANSWER d

c. The basis for real property taxation is actual

use and not ownership. "Actual Use of Real Property

s Basis for Assessment.-Real property zhall be

classified,valued and assessed on the basis of its

actual use regardless of where located,whoever owns

t,and whoever uses it."(LGC.Sec.217)

NOTES AND COMMENTS.

Real propertes shail be

appraised at the current and fair market value prevailing in the

ocality where the property is situated and ciassified for

assessment purposes on the basis of its actual use (Aled Benkng

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Corporation,elc,v Quezon City Govemmert,et al,G. R. No.154126.

October 11.2005)

ESSAY QUESTION:
The real property of Mr. and Mrs.Angeles, situated in

commercial area in front of the public market, was declarad in

their Tax Declaration as residential because it had been used

by them as their family residence from the time of its

construction in 2000.However,since January 2010,when the

spouses left for the United States to stay there permanenty

with their children,the property has been rented to a single

propnator engaged in the sale of applliances and agrl

products. The Provincial Assessor reclassified the property

a5 commarcial for tax purposes starting January 2012. Mr.

and Mrs. Angeles appealed to the Local Board of Assessment

Appeals,contending that the Tax Declaration previously

classifying their property as residential is binding.

How should the appeal be decided 7 (BAR: 2002,dates

Supplied)

SUGGESTED ANSWER: The appeal should be dismissed for lack

of ment The ciassificaton of real property for tax purposes is based on its

actual use.

d. Basis or test for exemption from real property

taxation is use and not ownership.

The test of

exemption from taxation is the use of the property for

purposes mentioned in the Constitution.(Apostolc Peleet v.

Cky Treasurer of Baguo,71 Phl.547)Thus,it does not matter who

the owner of the property is even if it is not a tax exempt

entity, as long as it is being used for religious,chantable or

educational purposes,then it is tax exempt

Conversely, even if the property is owned by the

government if the benefcial use has been granted,for

consideration or otherwise, to a taxable person,then the

property is subject to tax. (Provnce of Nueva Ecja v. Impenal

Mning Company Inc,118 SCRA 634)

B. Nature of real property tax

1. Nature of real property tax.

a.

Direct tax whose burden could not be shifted by the

one who pays to other persons.

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Ad valorem tax based on the assessed value of the

poperty

b.

Real property taxes are local taxes, not national

taxes

c. They are imposed on use and not ownership hence.

exemptions are also premised upon use and not ownership.

d.

They are progressive in character depending lo a

ertain extent on the use and value of the property.

。 Real property taxes are local taxes and not

national taxes. The holding in Meralco Secunties Industrial

Coporaton v. CBAA, et al.. L46245,May 31,1982;Benguet

Corporaton v. Central Board of Assessment Appeals,et al.,218

SCRA 271, that realty taxes are national taxes collected by

me local govemments is not anymore doctrinal as it relied

on the provisions of the fomer realty tax laws which were

aready superseded by the provisions of the 1987

Consttution and Rep.Act No. 7160,the Local Govemment

Code

NOTES AND COMMENTS: In Benguet,the Supreme Court

held. that "it is the natonal govemment, expressing itself through

me legislative branch that levies the real property tax.

Consequentity,when local governments are required to fix the

ates, they are merely consbtutad as agents of the national

govemment in the enforcement of the Real Property Tax Code."

Ths conclusion that real property taxes are national taxes was

amived at because of the provisions of Sec. 38 of the then Real

Property Tax Code which read:'Sec.39.Incidence of Real

Property Tax.-There shall be levied,assessed and collected in

provinces, cities and municipalites an annual ad valorem tax on

real property, such as lands, buildings, machinery and other

mprovements affixed or attached to real property not hereinafter

specifically exempted."(ernphasis supplied) This was taken to

mean that "the national govem,mant has already imposed realty

tax in Sec.38 above-quoted,laaving only the enforcement to be

done by local govemments.

The above interpretation was rendered anachronistic by the

provisions of the 1987 Consttution which delegated the power to

ocal govemment units,through the Local Government Code,to

evy taxes,fees and other charges. As it now stands, it is the local

govemment units that may ievy the real property tax. Thus,

＇Power to Levy Real Property Tax.-A province or city or a munk

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cipalty within the Metropolitan Manila Area may loyy an annual ad

vabrem tax on real property such as land, building.machinery,

and other improvement not hereinafter specifically cxenpted."

（Sec.232,R.A.No.7160,the Local Govemment Code,emphasn

supplied) Likewse,Soc.5.Article X of the 1987 Consttution

provides that 'taxes,fees and charges shall accrue erclusivoly to

the local governments." This is further amplified by Secs.271 to

274 of the LGC which distribute the proceeds of the real property

tax and spocial lovies to the local govemment concerned.

2. The Local Government Code does not define

real property. The former Real Property Tax Code

did not carry a definition of "real property" and simply says

that the realty tax is imposed on "real property". such as

lands, buildings, machinery and other improvements affixed

or attached to real property.

In the absence of such definition the Supreme Court

applied Article 415 of the Civil Code (Benguot Corp.v.Central

Board of Assessment Appeals,218 SCRA 271.276)

The above principle applies under the Local

Govemment Code which merely states thal an annual ad

valorem tax may be levied on "real property such as land.

building.machinery and other improvement..."(LGC,Sec.232)

3. Real property defined for real property tax

purposes. Republic Act No.7160,the Local Govemment

Code of 1991, has not defined the meaning of real property

for real property tax purposes. In general, real property

subject to the real property tax are those immovables

considered as such under the provisions of Republic Act No.

386,the Civil Code of the Philippines.

＂The following are immovable property:

（1)Land,buildings,roads and constructions of all kinds

adhered to the soil;

（2)Trees, plants,and growing fruits, while they are

attached to the land or form an integral part of an

immovable:

（3)Everything attached to an immovable in a fixed

manner, in such a way that it cannot be separated therefrom

without breaking the matenal or detenoration of the ooject,

（4)Statutes,reliefs,paintings or other objects for use or

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sranentaton,piaced in buildings or on lands by the owner

e immovable in such a manner that it reveals the

enton to atach them pernanently to the tenements

（5)Machinery,receptacles,instruments or implements

ended by the cwner of the tenement for an industry or

wons that may be camed on in a building or on a piece of

and,and which tend directly to meet the needs of the said

ndustry or works;

（6)Animal houses,pigeon houses,beehives,fish ponds

ar breeding places of similar nature, in case their owner has

placed them or preserves them with the intention to have

hen permanently attached to the land,and foming a part

ofit the animals in these piaces are included;

（7)Fertlizer actually used on a piece of land;

（B) Mines,quames,and slag dumps,while the matter

hereof forms part of the bed, and waters either running or

stagnant,

（9)Docks and structures which,though floating,are

ntended by their nature and object to remain at a fixed

place on a nver, lake, or coast.

（10)Contracts for public works, and servitudes and other

real nghts over immovable property."(Rep.Act No.386,Civil

Code of the Philppines,Art 415)

NOTES AND COMMENTS: There are certain instances

where personal property may be rogarded as real property for real

poperty tax purposes.

4.Analytical questions for Identifying property

subject to real property taxation:

a. "Is the property real property as defined under the

Cvil Code,Ant.415 ?" if so,then consider it as real property

subject to real property taxation.

If the answer is no because the property is personal

property under the civil law, then the question is,

b. "Is it essential and principal to the conduct of the

business ?" lf yes, it becomes real property subject to real

property taxation. If no, it is personalty that is not subject to

he real property tax.

5.For real property taxation personal property

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may be regaraed as real property.For.gorposes of

taxation the term "real property" may include things which

should generally be regarded as personal property. It is a

familiar phenomenon to see things classed as real property

for purposes of taxation which on general principles might

be considered personal property.(Manla Electrc Company v.

Cantral Board Of Assessment Appeals,114 SCRA 273,Cater Fhuls,Ine.

v. Central Board of Assessment Appea's, et al.114 SCRA 296)

NOTES AND COMMENTS: Article 415 (5) of Republic Act

No.385. he Cwil Code of he Phiippines.classfes as

immovables (real property)."Machinery,receptacles,instruments

or implements intended by the cwner of the tenement for an

industry or works that may be camied on in a building or on a piece

of land,and which tend directly to meet the needs of the said

industy or works." Reasoning a su contrano,if the machinery.

receptacles or implements were placed by a lessor or one who is

not the owner of the building or piece of land, the said machinery.

receptades or implements are not immobilized. Thus,under civil

law,they retain their character as personal property.

For real property tax purposes such personal properties may

be considered as real property, if they are essental and principal

elements of the business being conducted in said land or building

（Cater Phis.v. Central Board of Assessment Appeals, et al. 114 SCRA

296) and must have been placed by cne who is not the owner of

the land or building.

In summary,for purposes of real property taxation,real

prcperty may be:

a. That defined as immovables under Artcle 415 of Republic

Act No.386,the Civil Code of the Philippines;or

b. Personal property that are attached to an immovable (a

parcel of land or a building)by one who is not the ownor of the

parcol of land or building, which personal property are essental

and principal elements of the business being conducted in said

land or building.

c.Machinery,including mobile equipment, which are

essental to an industry.

6. Improvement,deflned. The Local Govemment-

Code has,for real property tax purposes,

defined

improvement as a 'valuable addition made to a property or

an amelioration in its condition,amounting to more than a

mere repair or replacement of parts involving capital

expenditures and labor,which is intended to enhance its

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aue,beauty or utlity cr to adapt it for new or further

voses"LGC,Sec.199(m)】

1. lustrations of Improvement subject to real

property tax.

1) Two cil storage tanks which are not imbedded in

me land but merely placed on tep of a foundation with an

sphait layer and not attached to the foundation are

movements on the land which enhance its utility rendering

usetul for the industry conducted thereon. Thus,they are

sbjed to real property taxes (Manila Electne Co.,v.Central

5cee of Assessment Appeals,114 SCRA 273)

2)Sugar mills with appropnate machinery.(Femandez

，Swsn,etc,19 Phl 76)

NOTES AND COMMENTS: The author submits that the

ng which did not subject transmission tower lines trom a

droeiectre plant in Laguna to the City of Manila to real property

21es(Board of Assessment Appeab,et al.,v.Manila Electnic Company,

15334,Januay 31,1964). should be reexamined in the light of

arent law and junsprudence.

b.Machinery,defined. The Local Govemment Code

has,for real property tax purposes,also defined machinery

s embracing "machines,

equipment,

mechanical

mntrivances,instruments,appliances or apparatus which

may or may not be attached,permanently or temporanily,to

he real property. lt includes the physical facilities for

oduction,the installations and appurtenant services,

acites,those which are mobile, self-powered or self-

popeled,and those not permanenty attached to the real

Pmperty which, actually,directly,and exclusively used to

meet the needs of the particular industry, business or

edvity and which by their very nature and purpose are

desgned for,or necessary to its manufacturing,mining.

byging,commercial;industnal or agricultural purposes."

LGC,Sec.199(01

NOTES AND COMMNENTS: It would seem from the above

Cefntion that moble material handling equipment such as forklifts.

acie cranes lor container vans,and cargo handling equlpment

br aircraft and vessels; egricultural tractors, threshers,palay

yers,etc.,ATM machines of certain banks,computers,and even

qenerator sets may be considered ss real property for real proper-

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ty taxation, if they are essential to the conduct of the business.

The property to be considered immobilized for real property

taxes must be "essential and principal elements"of an industry

without which such industry or works would be "unable to function

or carry on the principal industral purpose for which it was

established."This is the doctrine of "essentality" enunciated In

Mindanao Bus Co. V. City Assessor,ef al.,L-17870,September

27,1962.

However,property which are

merely incidentals-

acquired and used only for expediency to facilitate or improve

services are not part of real property.

C.

MERALCO pipeline considered real property.

The

pipeline system inslalled

by

Meralco

from

Batangas to Manila for conveying petroleum is considered

real property for tax purposes.

REASON: It is imbedded and atlached to the land and

cannot be removed therefrom without dismantling the steel

pipes which were welded to form the pipeline. lt is real

property.(Meraico Securties Industnal Corporation v.Central Board of

Assessmont Appoals, 114 SCRA 260)

d. Gasoline station equipment and·machineries

subject to real property tax.Gasoline station equipment

and machineries like above ground and underground tanks,

elevated water tanks, water tanks, gasoline pumps.

computing pumps, water pumps, car washers, car lifts,air

compressors,tire inflators and the like attached to the

pavement and to the shed are real property.

REASONS:They are immobilized by destination because

they are essential and principal elemenls of the business of

operating a gasoline station.

Furthermore,for purposes of taxation, the term "real

property" may include things which should generally be

regarded as personalty under the civil law.(Calter Phils.,v.

Centrel Board of Assessment Appeals,114 SCRA 296)

1) But see Mindanao Bus Co.v.City Assessor,

et al.,L-17870,September 27,1962,where the

personal property were not considered "essential and

principal elements" of the industry.

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The property to be considered immobilized for real

ecperty taxes must be essential and principal elements"of

Pndusty without which such industry or works woulkl be

vabie to function or cay cn the principal industrial

pcse for which it was established.

A repar shed is not essontial for the conduct of the

sness of transportation. Thus,if constructed on rented

nd wouid not be considered as real property.

2)Incidentals are not real property. Property

are merely incidentals -acquired and used only for

edency to facilitate or improve services are not part of

a property.

a) Examples of

property

considered as

nodentais,not essentials, thus retaining their movable

character.

（1) Cash registers,typewriters used by

hotels

（2) Forkiifts,jeep-wagcns,IEM machines used

by airine companies;

（3) Delivery trucks,adding machines used by

fiquor and soft drink manufacturers;and

（4) Tools and equipment used by a transport

company in its service shop..REASON: The

transport business could be camed on even without

a service shop.

Power barges are real property for real property

zxation. llustration:FELS Energy,Inc.,had a contract to

py NPC with the electriaty generated by FELS' power

es. The contract also stated that NPC shall be

esponsible for all real estate tzxes and assessments. FELS

ten recerved an assessment of real property taxes on its

power barges from the Provincial Assessor of Batangas. It

ed a motion for reconsideration with the Provincial

55es5or.

a. Upon denial,FELS elevated the matter to the Local

Eard of Assessment Appeals (LBAA),where it raised the

dlowing issues

1)Since NPC is tax-exernpt then FELs should also

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be tax-exempt because of its contract with NPC.

2) The power barges are not real property subject

lo real property taxes.

b. Upon the olher hand,the Local Treasurer insists that

the assessment has attained a state of finality hence the

appeal to the LBAA should be dismissed.

Rule on the conflicting contentions.

HELD:

a. All the contentions of FELS are without merit:

1) NPC is not the owner of the power barges nor

the operator of the power barges. The tax exemption

pnvilege granted to NPC cannot be extended to FELS.

The covenant is between NPC and FELs and does not

bind a third person not privy to the contract such as the

Province of Batangas.

2) The Supreme Court of New York in

Consalidated Edisen Company of New York, Inc.,et al..

v. The City of New York,et al, 80 Misc. 2d 1065

（1975) cited in FELS Energy, Inc., v. Province of

Batangas,G.R. No.168557,February 16,2007 and

companion case, held that barges on which were

mounted gas turbine power plants designated to

generale electncal power, the fuel oil barges which

supplied fuel oil to the power plant barges, and the

accessory equipment mounted on the barges were

subject to real property taxes.

Moreover,Article 415(9) of the Civil Code provides

that"[d]ocks and structures which, though floating,are

intended by their nature and object to remain at a fixed

place on a nver, lake or coast' are considered

imrnovable property by destination being intended by

the owner for an industry or work which may be carmied

cn in a building or on a piece of land and which tend

directly to meet the needs of said industry or work.

b. The Treasurer is correct. The procedure do not.

allow a motion for reconsideration to be filed with the

Provincial Assessor.

To allow the procedure would indeed invite comuption

in the system of appraisal and assessment It conveniently

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sagrat prone situation where values of real property

be ntialy set unreasonaoly high,and then subsequentty

ed upon the request cf a property owner. In the latter

rsance,allusions of possible cover,illicit trade-off cannot be

roced,and in fact can conveniently take place. Such

casion for mischief must be prevented and excised from

a system (FELS Enerpy.hc,v.Province of Berangss, G. R. No.

85,February 16,2007 and companion case,ctng Callana v.Cce of

MOtucsman G R.Nos.115253-74,January 30,1998,285 SCRA 648)

ESSAY QUESTIONS:

1) Iocos Bus Co.,transportation company with

aa for Its buses, maintains In sald garage built on a land

ned by ik,a repair shop,blacksmith and carpentry shop

rdachineries and equipment sltting on cement or wooden

atfoms,which can be moved around and about In the

nmul shop.Are the machineries and oqulpment assessable

rna propartyzxpurpos85 ? Why7(BAR:1975)

SUGGESTED ANSWER Yes. The repair shop, blacksmith and

aprty shop.machnenet and eguipment are considered as real

y tor tzx purposes because they have been placed there by llocos

er ensporn a

atng and which tend drecty to meet the needs of the

rpotzbon busness

NOTES AND COMMENTS: If the land is merely rented,

Te he machinenes and equipment are not immobilized because

tey are not "essential and principal elemens' of the

tsporzton business. The ransport business could be cernied

f trven whout the repar shop. btacksmith and carpentry shop

re machineries and eguipment.(Mindenao Bus Co.v.Cty Assassor,

。L-17870,Septemper 27,1962)

f the machineries and equipment were placed by the

nr of the tenement,the concept of being "essential and

mapal elements" do not find application. Instead,the

urement is that the machinenes and equipment are "Intended

yhe cwner of the tenement for an Industry or works that may be

amed cn in a building or on a plece of land,and which tend

etyto meet tho needs of the uuid Industry or works*.

2)"C,"a gasoline company, Installed gasollns

Ialions located at leased land. The statons conslsted of

achines and egulpment, ettached or afixed to sald staton.

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Undor the loase contracts, the lessors of the land do not

become the owners of machinesand equipment. The City

Assessor of Pasay City considered the equipment and

machinos taxable realty and Imposos roalty taxes on the

855653ed value thoreof. Is the City Assessor correct In

declaning the machines and equipment taxable realty7

Reasons.(BAR:1982)

SUGGESTED ANSWER Yes,the machines and equipment are

taxable realty. They are essental and principal elements to the conduct
of the busness of a gasoine staton. (Catex Phds,v Central Board of

Assessment Appeals,114 SCRA 296]

3)Mekaniko Corporation operates a car repair

shop in the City of Manila. The repair shop is located on a

piece of leased land. The assets owned by Mekaniko

Corporation are:

a. Tow truck

b. Leasehold improvements consisting of a firewall,

repalr shed,and an administrative office

c. Office furniture and equipment

d. Car hoists

e.Water tank and tower located above ground. The

tower is bolled to the ground but ir can be removed

f.Heavy duty rubber hose which can be connected to

the water tank for cleaning cars and trucks

g. Gasoline storage lank located underground

h. Various repair tools such as pliers, wrenches,

scrow drivers,and the like

1. Welding machine and paint spray compressor which

are on rollers

J.Metal stamping/cutting equipment bolted to a concrete

base which is in tum afrached to the land.

It ls the position of the Manila City Assessor thar

since all of the above properties are actually,direcuy and

essentially being used by the taxpayer to meot the needs of

its business, then they are all subject to the real property tax.

Examine the above assets one by one and state when the City

Assessor is correct and when he is wrong giving reasons.

（BAR:1986)
SUGGESTED ANSWER The Mania Cty Assessor is correct witn

respect to the leasehold improvemens,car hoists,various repair tools.

weldng machine,paint spray compressor and metal stampng/cuttng

equpinent. This is so, because the tems are essentai and pnncpal

elements of a repar shop wihout which it could not operate

On the other hand,the tow tuck,water tank,tower,heavy duty

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we.and gessine atoroce lanks are merely incidental t the

cedeno aovtale or iprove the seic

NOTES AND COMMENTS:The tax treatment of the various

os es real prpery a sstic apprcach.Technicaly

ing.tese are expensed tools and do not form part of the

sr bese,subject to real property taxation.

Under Article 415 of the Cvil Code,in order for

cthey and equlpment to ba considered real property,

ust be placed by the owner of the land and, in addlion,

and te directy meet the reeds of the Industry or werks

ad on by the owner.Ol companles,such as Celtex and

instal underground tanis in the gasollne stations

aad on land leased by he oll companles from others.Are

hesn anderground tanks which wera not placed there by the

of the land but which wera instaad placed there by the

essee cf the land,considered reel property for purposes of

popery taxation under the Local Govemment Code ?

can your answer (BAR:2001)

SUGGESTED ANSWER: Yes Fersonal property under the avii

ray be considered as real property for purposes of taxes where the

san essental and prrcpal element to the conduct of the

ss Underground tanks are essential to the conduct of the business

fipsoine staton wthout which it would not be operatonal. (Carex

uhe v Cental Board of Assssment Appeals, er al, 114 SCRA

5 Under Article 415 o! the Civil Code, In order for

hnry and equipment io be considered real property, the

cs must be placed by the owner of the land and,in

020on, must tend to direcdy meet the needs of the Industry

ois camed cn by tho owner. Oll companies Install

ground tanks in the gasoline stations located on land

zad by the oil companies from the owners of the land

n the gasoline stations fare] locatod.

Arm those

derround tanks, which were not placed there by the owner

tu land but which were instead placed there by the lessee

tu land,considared real property for purposes of real

y taxation under the Lncal Govemment Code ?

can.((BAR:2003)

Republic Power Corporation (RPC) Is a govemment-

ned and controlled corporztion engaged in the supply,

Mintion and ransmission of electric power.In 2010,in

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order to provide electricity t Southem Tagalog provinces,

RPC entered into an agreement with Jethro Energy

Corporation (JEC), for the lease of Jethro Energy Corporation

（JEC), for the loase of JEC's power barges which shall be

berthed at the port of Balangas City. The contract provides

that JEC shall own the power barges and the fixtures, fittings,
machinery,and equipment therein,all of which JEC shall

supply at its own cosf, and that JEC shall operate, manage

and maintain the power barges for the purpose of converting

the fuel of RPC into electricity. The contract also stipulates

that all real estate property and assessments, rales and other

charges, in respoct of the power barges, shall be for the

account of RPC.

In 2012,JEC received an assessment of real property

taxes on the power barges from the Assessor of Balangas

City, JEC sought reconsideration of the assessment on the

ground that the power barges are exempton from real estate

taxes under Section 234 (cJ of R.A. No. 7160 as they are

actually, directly and exclusively used byRPC, a govemment-

owned and controlled coporation.

Furthermore, even

assuming that the power barges are subject to real property

tax, RPC should be held liable therelor, in accordance with

the tenms of the lease agreement Is the contention of JEC

correct 7 Explain your answer. (BAR:2009,dates suppled)

MULTIPLE CHOICE QUESTION:

Benjie leases a parcel of land from Chit for a period of

ten(10) years. Benjie constructed a warehouse on the Land.

In order to operate the warehouse, Benjie installed thereon a

removable,overhead crane. A forklift is in the warehouse

used solely for warohouse operations to load and unload

cargoes from trucks as well as stack and arrange goods.

stored in the warehouse.

As part of the contractual

agreement,the title of ownership to the warehouse,the

overhead crane and the forklift were immediately transferred

to Chit.

a. Chit shall pay real property taxes on the land,the

warehouse,the overhoad crane and the forklift.

b. Benjie shall pay real property taxes on the land,the

warehouse,the overhead crane and the forklift.

c. Chit shall pay real property taxes on the land while

Benjie shall pay real property taxes on the warehouse, the

overhead crane and the forklitt.

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genjie shall pay real property taxes only on the land,

muzhouse and the crane.

SGGESTED ANSWER b

o o oHE ANSWER:Choice b is the

oce Bene sha yrrl prooety tares on he loro he

e the cemead crane and the torkdit

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Chapter 2

IMPOSITION OF REAL PROPERTY TAX

A. Power to levy real property tax

1. Law governing real property taxation.

Real

property taxation in the Philippines is govemed by:

a.

The provisions of the 1987 Philippine Constitution

specifically, "Each local govemment unit shall have the

power to create its own sources of revenues and to levy

taxes,fees,and charges subject to such guidelines and

limitations as the Congress may provide,consistent

with the basic policy of local autonomy. Such taxes,

fees,and charges shall accrue exclusively to the local

govemments."(1987 Philippine Consututon,Article X,Sec 5)

b. The guidelines and limitations provided by

Congress are those found under the provisions of Republic

Act No.7160.the Local Govemment Code,which was

enacted by Congress in pursuance with the constitutional

mandate that,"The Congress shall enact a local

govemment code which shall provide for a more

responsive and accountable local government structure

xxx."(1987 Phappine Consttuton,Artcle X,Sec 3.paraphrasing

supcled)

c. Pres.Decree No. 921 divided Metro Manila into

four(4) treasury and assessment districts in order to have a

progressive revenue raising program that will not unduly

burden the taxpayers. It likewise pròvided for the procedure

of revision of fair market values, classification and

assessment within the four (4) districts.

NOTES AND COMMENTS: The Supreme Court ruled in Ty

v.Trampe,et al.,G.R. No.117577,December 1,1995,that Rep.

Act No.,7160,the Local Government Code did not amend Pres.

Decree No.921.

2. Provisions of Republic Act No. 7160,the Local

Government Code on real property taxation. The

law on administration,appraisal,levy,and collection for

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mal property tax is found in Title Two Book ll of Republic A

7160,otherwise knowm as the Local Govemment Code

11991(to be referred as LGC). (LGC,Sec.197)

ii spans from Sec. 197 to 283 and is arranged under the

folowing chapters:

1.General Provisions

2.Appraisal and Assessment of Property

3.Assessment Appeals

4.Imposition of Real Property Tax

5.Special levies on Real Property Tax

6.Collection of Real Property Tax

7.Disposition of Proceecs

8.Special Provisions

NOTES AND COMMENTS: Sec.534 (c) of the Local

Govemment Code of 1991 expresshy repealed Pres.Decree No.

454,the Real Property Tax Code.It is however important to note

mat some of the provisions of the Real Property Tax Code were

repicated in toto by the provisions of the Local Govemment Code

f1991.It should not,therefore, be surprising to see in this Book

references to cases decided by the Supreme Court interpreting the

Real Property Tax Code.

2. Real property taxes, defined. These are direct

taxes imposed on the privilege to use real property such as

land,building,machinery,and other improvements(Province of

Nueva Ecja v.Impenal Mining Co,Inc.,G.R.No.59463,November 19.

1982).unless specifically exempted.

NOTES AND COMMENTS: It is true that Villanueva, et al., V.

Cty of Moilo,L-26521,December 28,1968, has defined real

property tax as a 'direct tax on the ownership of lands and

buldings or other improvemen's thereon not specifically exempted

and is payable whether the property is used or not, although the

Value may vary in accordance wth such factor."However,the

defnitionwas taken from the former Assessment Law

Commonwealth Act No.470),where the basis of real property

axaton was ownership or interest tantarnount to ownership.

twas held in Province of Nueva Ecija v. Imperial Mining Co.,

hc,No.L-59463,November 19,1982,that Pres.Decree No.464,

he Real Property Tax Code,changed the basis of real property

Eraton adopting the policy of taxing real property cn the basis of

actual use,even if the user is not the owner.The Supreme Court

Mther heid that the above policy declaration is given substance by

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the following provisions of P.D.No.464:

＂Actual use-shall refer to the purpose for which the property

＇is principally or predominantiy ulilized by the person in possession

of the property"[Sec.3(a)]

＂Actual Use of Real Property as Basis for Assessment.-Real

property shall be assessed on the basis of its aclual use

regardless of where located and whoever uses it" (Secton 19,

Italics suppled)

Finally, the present law on real property taxation (RA No 7160.

the Local Government Code),has adopted in loto, the aforesaid

provisions on actual use which was merely renumbered from Sec.

3 (a),to Sec. 199 (b). The provision on Actual Use of Real

Property as Basis for Assessment(Sec. 19,of P D. 464) was

rewcrded to read."Real property shall be classified, valued and

assessed on the basis of its actual value regardless of where

located,whoever owns it,and whoever uses it." Thus, the

provision is essenbally the same.

3. Kinds of impositions on real property.

。a.

Real property taxes:

1)

Basic real property tax,

2)

Special Education Fund- additional 1%on

assessed value(LGC,Sec.235).

3)

Ad Valorem Tax on Idle Lands-not

exceeding 5%on assessed value.(LGC,Sec.236)

b. Special levy by Local Govemment Units.(LGC,Sec.

240)

NOTES AND COMMENTS: Book ll of te Republic Act No.

7160.the Local Govenment Code of 1991,is entiled Local

Taxation and Fiscal Matters. It's Title Two is entted Real

Property Taxaton,with ils Chapter 4 entted as Imposition of Real

Property Tax,and its Chapter 5, is enttled Special Levies on Real

Property. This results to confusion, if we consider that the

provisions of Sec. 235 enttled, Additional Levy on Real Prdperty

for the Special Education Fund, refers to it as "an annual tax of

one percent", and Sec.236, is an Ad Valorem Tax on Idle Land.

Upon the other hand, Sec.240 which refers to the Special lovy by

Local Govemment Units does not refer to such "special levy" as a

tax.

Tho author submits that, there are three (3) real property

taxes under the provisions of Republic Act No. 7160: the Local
Government Code of 1991; the basic real property tax under

Socs.232 and 233;the additional levy on real property for the spe-

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ci educaton fund unde cez.235,and the additional ad valorem

onidle land under Soc-o6Furthermore,there is a speen

ey under Sec.240 which is not a tax.

Finaily, a special levy is not a tax. There are distinctions

eeen a special levy (special assessment) and a tax,among

whch include the following:

1)Subject Taxes are levied on land,persons,property.

noome business etc.,while special assessments are levied on

and

2) Liability: Taxes are personal liability of the taxpayer.

le special assessments in some states cannot be made a

personal liability of the person assessed.

3)Bass: Taxes are based on necessity and partially

on benefts,while special assessments are based solely on

benefts

·4) Application: A tax has general application,while special

assessments have special application only as to a particular time

and place

ESSAY QUESTIONS:

Aside from the basic real ostate tax, give three (3) other

ares which may be imposed by provincial and clty

govemments as well as by municipalitias in the Metro Manila

ra.(BAR.2002)

SUGGESTED ANSWER:The three(3) other taxes are the special

ducaton fund,the ad valorem tax on idle lands, and the special levy.
NOTE The queston is wiong However, do not wnte in the Bar

Eamnabons that a cueston is wrcng.

There are only two real propeity taxes, that could be imposed,aside

tom me base real property tax. The special levy,also known as a

ecal assessment, is not s tax but an imposition to recover at least sixty

pecent of the pubic werks expenditures of a local government unit

4,Power to levy real property tax. "Power to Levy

Real Property Tax.-A province or city or a municipality

wthin the Metropolitan Manila Area may levy an annual

ad valorem tax on real property such as land, building,

machinery,and other improement not hereinafter

specifically exampted."(LGC,Sec.232)

L.Limitation on the exercise of the power. While a

ocal govemment unit is authorized under several laws to

colect real estate tax on properties falling under its temtonial

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junsdiction, il is imperalive first to show that these properties

are unquestionably within its termitonal boundanes. [Sta.Lucia

Realty& Development v. Cty of Pasg. 652 SCRA 444(2011]

b. Local leglslative bodies that could exercise the

power of real property taxation.

1) Sangguniang Panlalawigan

2)Sangguniang Panlungsod

3) Sangguniang Bayan of a municipality within the

Metropolitan Manila Area

MULTIPLE CHOICE QUESTION:

One of the local govemment units below does NOT have

the power to impose real property tax:

（■
Bacoor,Cavite

b)

Davao City

Tarlac Province

Malabon,Metro Manila (BAR:2012)

SUGGESTED ANSWER:a)

c. Subjects of local legislative

ordinances

Involving real property taxation.

1) Tax ordinance fixing a unifom rale of basic real

property tax.(LGC,Sec.233):

2) Tax ordinance imposing an additional levy on real

property for the Special Education Fund.(lbid,Sec.235)

3) Taxing ordinance levying an addilional ad valorem

tax on idle lands.(lbid.,Sec.236)

4)Taxing ordinance imposing a special levy on lands

specially benefitted by public works

projects or

improvements funded by the local govemment unit

concerned.(Vbd,Sec.240)

5) Tax ordinance granting discount for advance

payment of the basic real property tax and the Special

Education Fund.(/oid,Sec.251)

6)、Ordinance stating the fair market values of the

different classes of real property.(lbid,Sec.212)

7) Amendments to the ordinance stating the fair

market values of real property.(bid.,Sec 214)

8) Tax ordinance classifying real property as residen-

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wiotral, commercial,industrial,mineral,timbertand,

spcial(id.215.2"par.)

Rutes of Levy,"A province or city ora munlclpality

in the Metropolitan Manila Area shall fx a unifory

of basic real propaity tax appllcable to their

sective localities as follows:(a)in the case of

ince,at the rate not exceeding one percent(1%) of

nsessed value of reai property;

（b] In the case of a city or a municipality within the

yetopolitan Manila Area, at the rate not exceeding two

wrant(2%) of the assessed value of real property."

3C.Sec.233)

1) Rates of baslc real property tax.

a)Province,not exceeding one percent (1%) of

the assessed value of real property.

b) City or municpality within the Metropolitan

Manila Area,not exceeding two percent (2%) of the

assessed value of real property. (LGC, Sec.233)

No public hearing raqulred. No public hearing

ral be required before tne enactment of a local-tax

nance levying the basic rea! property tax. (IRR, LGC,Sec.

（us santence)

NOTES AND COMMENTS:The author submits that the above

sons of the IRR,LGC is invalid.Mactan Cebu Intemational

Apot Authonity v. Marcos et al 261 SCRA 667 stated in no

catan tems that if ordinary legislation requires public hearing

w much mcre tax legislation that imposes a burden. While

Vaen relers to a national tax. the author submits that the rule

res equal application to local govemment legislation. After al,

zr egsaton would impose a burden whether the basic.real

pmety tar or any other kind of local tax.

Fnally,previous' pronouncements of the Supreme Court

epetng the provisions of the lormer Real Property Tax Code

epovsions of which were expressly repealed by the Local

emment Code),stated that public heanngs are mandatory

t approval of tax ordinance, but this sbll requires the

ECayer lo adduce evidence to show that no public heanngs ever

pace.(Reyes,et al.v.Court of Appeals, et al. G.R. No. 118233.

Kamber 10,1999)

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Public heanings are required to be conducted prior to the

enactment of an ordinance imposing real property taxes.(Figuerres

v.Court of Appeals,el al,GR.No. 119172,March 25.1999)

f. Distribution of Proceeds. "The proceeds of the

basic real property tax,including interest thereon,and

proceeds from the use,lease or disposition,sale or

redemption of property acquired at a public auction in

accordance with the provisions of this Title by the province

or city or a municipality within the Metropolitan Manila Area

shall be distributed as follows:

（a) In the case of provinces:

（1) province-Thirty-five percent(35%) shall accrue

to the general fund;

（2) municipality-Forty percent(40%) to the general

fund of the municipality where the property.1s located;

and

（3) barangay-Twenty-five percent (25%) shall

accrue to the barangay where the property is located.

（b) In the case of cities:

（1) city-Seventy percent (70%)shall accrue to the

general fund of the city;and

（2) Thirty percent(30%) shall be distnbuted among

the component barangays of the cilies where the

property is located in the following manner.

（） Fifty percent (50%) shall accrue to the

barangay where the property is located;

（ii)Fifty percent (50%) shall accrue equally to

all component barangays of the city; and

（c) In the case of a municipality within the Metropolitan

Manila Area:

（1) Metropolitan Manila Authonty-Thirty-five

percent(35%) shall accrue to the general fund of the

authonty:

（2) municipality-Thirty-five percent(35%) shall

accrue to the general fund of the municipality where the

property is located;

（3) barangays-Thirty percent (30%) shall be

distribuled among the component barangays of the

municipality where the property is localed in the follow-

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Nmanner

1)Fifty percent (50%) shall accrue to the

harangay where the property is located;

（i) Fifty percent (50%) shall accrue equally to

alcomponent barangays of the municipality.

The share of each barangay shail be released.

need of any furher asion directiy to the barangay

er ona uareny basis wihin five (5) days anter ay

d each cuater and Shail not be subject to any lin eor

Seax for whatever purpose.(LGC,Sec.271,arangement

ESSAY QUESTION:

An ordinance was passed by the Provincial Board of

vnce in the North,increasing the rate of basic roal

mperty tax from 0.006% 10 1% of the assossed value of the

poperty effective Jancary 1,2013. Residents of the

anicpaites of the said province protested the Ordinance

gound that no public hearing was conducted and,

nfo,any increase in the rate of roal property tax is void.

s here merit in the protast ? Explain your answer.(SAR:

2 (suppied)

SUGGESTED ANSWER No.he protest is wihout ment No public

tal be requred before the enactment of a local tax ordinance

m he besc real property tax.(iRR.LGC,Sec.324,last sentence)

Additionai levy on real property for the Special

Education Fund."Additional Levy on Real Property

rhe Special Education Fund. - A province or city, or a

unicipality within the Metrocolitan Manila Area,may

ey and collect an annual tax of one percent (1%) on

e assessed value of real property which shall be in

M4ton to the basic real property tax." The proceeds

tenof shail exclusively accrue to the Special

Education.Fund(SEF)."(LGC,Sec.235,1"sentence)
Disposition of the proceeds of the speclal

ducation fund."The procoeds thereof shall exclu-

aly accrue to the Special Education Fund (SEF)."

LSC,Sec 235.2" sentence)

＂Application of Procoeds of the Additional One Par.

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cent SEF Tax.-The proceeds from the additional one

porcont (1%) tax on real property accruing to the

Special Education Fund(SEF)shall be automatically

reloasod to the local school boards:Provided,That,in

Case of provinces, the proceeds shall be divided equally

botwoen the provincial and municipal school boards:

Provided,however,That the proceeds shall be allocated

for the operation and maintenance of public schools,

construction and repair of school buildings,facilities

and equipment, educational research, purchase of

books and periodicals, and sports development as

determined and approved by the Local School Board."

（LGC.Sec.272)

（a) The proceeds of the additional one percent(1%)

real property tax accruing to special education fund shall be

automatically released to the local school boards.

（b) In case of provinces, the proceeds of the special

education fund shall be divided equally between the

provincial and municipal school boards.

（c) Said proceeds shall be allocated as delenmined

and approved by the local school board concerned only for

the following purposes:

（1) operation and maintenance of public

schools;

（2) construclion and repair of school

buildings,facilities and equipment,

（3) educational research;

（4) purchase of books and periodicals,and

（5) sports development*(RRI LGC.Rule XXXI,Art.363.

arrangement and numbenng supplied)

6. Additional ad valorem tax on idle land."A

province or city, or a municipality within the

Metropolitan Manila Area, may levy an annual tax on

idle lands at the rate not exceeding five percent (5%) of

the assessed value of the property which shall be in

addition to the basic real property tax." (LGC,Sec.236)

a. Purpose of imposing ad valorem taxes on idle

land. To penalize property owners who do not use their

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esn erder to contrbete to natonal deveoprer

doland subject to the ad valorem tax on ldle

e Lands Cove SaF s of real

uxton,idle lans shal include the folowine

u"Agricultural lands,more than one(1)hactare in

able for ultivaton,dairying,iniand fshern

Acther agriculturl uses one-halr(12)of whicn

uncutivated or unimoroved by the owner of the

oty or person having legal interest therein.

otural lands planted to permanent or perennial

with at least fifty (5C) trees to a hectare shall not

considered idle lands. Lands actually used for

zing purposes shail likswise not be considered idle

ms

［bLands,other than agricultural,located in a city

xmunicipality,more than ore thousand(1,000)square

ers in area cne-hal (1/2) of which remain unutilized

rnimproved by the owner of the property or person

ming legal interest therein.Regardless of land area,

s Section shall likewise 2pply to residential lots in

sbdvisions duly approved by proper authorities,the

meship of which has been transferred to individual

wes,who shall be liable for tha additional tax:

ided,however,That individual lots of such

udvisions, the ownership of which. has not been

slered to the buyer shali be considered as part of

ubdivision, and shall be subject to the additional

ayable by subdivision owner or operator." (LGC, Sec.

Summary outline of land subject to the ad

torem tax on idle land.

1) Agricultural larids, more than one (1)hectare

1221

a)suitable for cultivation,dairying,and inland

fshery,and other agricultural uses.

（1) one-half(1/2) of which remain

uncultivated or unimproved by the owner of the

property or person having legal interest therein.

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2) Lands,other than agricultural,located in a city

or municipality,

a) more than one thousand(1,000)square

meters in area.

b) one-half (1/2)of which remain unutilized

or unimproved by the owner of property or persons

having legal interest therein.

3) Residential

lots in

subdivision,

duly

approved by proper authonties regardiess of area,

a) lf ownership transferred,individual owners

shall be liable.

b) If ownership of individual lots not transferred

to buyer, subdivision owner or operator liable. (LGC.

Sec.237,arrangement and numbenng supplied)

C.

Disposition of proceeds of tax on idle lands.

＂Tha proceeds of the additional real property tax on idle

lands shall accrue to the respective general fund of the

province or city where the land is located.In the case of

a municipality within the Metropolitan Manila Area,the

proceeds shall accrue cqually to the Metropolitan

Manila Authority and the municipality where the land is

located."(LGC,Art.273)

d. Idle lands exempt from the tax. "A province or

city or a municipality within the Metropolitan Manila

Area may exempt idle lands from the additional levy by

reason of force majeure, civil disturbance, natural

calamity or any cause or circumstance which physically

or legally prevents the owner of the property or person

having legal interest therein from improving,utilizing or

cultivating the same."(LGC,Sec.238)

Summary outline of Idle lands exempt from the

additíonal levy on Idle lands. A province or city or a

municipality within the Metropolitan Manila Area

1) may exempt idle lands from the additional levy by

reason of

a) force majeure,

b) civil disturbance,

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c)natural calamity

d)or any cause or circumstance

2whch physicaly cr legaly prevents the owner of

ooety or person having legal interest therein

3 rom improving.utlzing or cultivating the same.

Se 238,amangement and numbering supplied)

L unds not consldered ldie and thorefore

mpted from the ad valorem tax on ldle land.

1)Agnicutural lands planted to permanent or

eenniai crops with at ieast fity(50)trees toa hectare.

2)

Lands actually used for grazing purposes. ILGc.

2711

usting of ldle lands by the assessor."The

incial,city or municipal assessor shall make and

p an updated reccrd of al idle lands located within

s rea of jurisdiction.For purposes of collection,the

ml. chy or municpal assessor shal fumish

copy thereof to the provincial or city trezsurer who shall

othy,on the basis cf such record,the owner of the

poperty or person having legal interest therein of the

rposition of the additional tax."(LGC,Sec.236)

ESSAY QUESTIONS:

1) Discuss the valldity of the Imposition of additdonal

nulytar on Idle lands.(BAR.1981)

SUGGESTED ANSWER: The imposrjon is valid because t ie for a

apose Itis imposed h order b ponalze property ownen who do

u te property productvely,and to oncourage utlization of land

Kcesn order to contrbute to naonal develcpment

21 A city outside of Metro Manla plans to enact an

dnance that wll impose a apoclal lavyon Idie lands located

hnadntal subdivislons within Its terrttorisl Juriadiction In

ion to the besle real property tax. f the lot owmers of a

dysion located In the sald city seek your legal advice on

taratar,what would your adyice be ? (EAR:2005)

SUGGESTED ANSWER:Iwould vhe them that the cty hes the

Ltoty te impose a special levy on idie resldental lots in subdivisions

7/s5 of2rea

Iwould further advise them other to pay the tax,sel their lo's or to

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construct or place improvements on their idle resdental lots so as not to

be subject to the lax

NOTES NOT PART OF THE ANSWER: The reader should

Ignore the use of the words "spocial lovy."Because there is no

showing that the imposition is for the recovery of expenditures for

infrastructure.What is apparent is the intendment of the examiner

to test the examinee's understanding of the ad valorem tax on idle

land.

MULTIPLE-CHOICE QUESTION:

Which among the following real property may be subject

to the ad valorem tax on idle land 7

a. A vacant 120 sq.m. residential lot located in an

approved subdivision.

b. Two hectares agricultural land with nothing planted

except 100 fruit trees.

c. Thee hectares uncultivated land which for the time

being is used for grazing cattle..

d. 1,200 sq. m. residential lot on which a house with a

floor area of 130 sq.m.is constructed and the rest used by the

owner as his garden.

SUGGESTED ANSWER: a

EXPLANATION NOT PART CF THE ANSWER Choice a is the

appropnate answer. A vacant 120 sq m. residential lot located in an

approved subdivision.

7. Special levy, defined. An imposition made by a local

government unit that has spent for the construction of an

infrastructure upon lands that are specially benefitted by that

infrastructure up to the extent of not more than sixty percent

（60%) of the amount spent.

a. Nature of special levy also called special

assessment. A special assessment is an imposition for

the purpose of recovering not more than sixty percent (60)

percent of the public works expenditure for the construction

of infrastructure that benefits specific real property.

b. Speclal levy by local government units. "A

province, city or municipality may impose a special levy

on the lands comprised within its territorial jurisdiction

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caly benefited by public works projects or

mprovemants fundad by the local govemmont unit

encemed:Provided,however,That the special levy

ui not exceed sixty percent (60%) of the actual cost

ofsuch projects and improvaments,Including the costs

d acquiring land and such other real property In

Connection therewith:Provided,further,That the

ecial levy shail not apply to lands exempt trom basic

al property tax and the remainder of the land portiong

which have been donated to the local govemment

nt concamed for the construction of such projects or

mprovementa."(LGC,Sec.240)

NCTES AND COMMENTS: It is clear from a reading of the

aferent provisions of the LGC that only a province or city or a

mrcpaty within the Metropolitan Manila Area "may levy an

al ad vakram tax on real property"(LGC,Sec.232),an

nnual tax of one percent (1%) on the assessed value of real

property which shall be in addition to the basic real property

㎡"(zc. Sec. 235). and "an annual tax on idle lands at the rate

ot exceeding five percent (5'%) of the assessed value of the

property which shall be in addition to the basic real property

＂（bc.Sec.236)

However,municipaltes even if outside the Metropoiitan

ia Area may impose the special levy. "A province,clty or

munciptity mey impose a special levy on the Lands

compnsed within its territorial jurisdiction specially benefited

typublic works projects or irnprovements funded by the local

wemment unt concemed:

xxx"

（LGC. Sec. 240.

2aphrasng supplied) Sec. 240 does not qualify municipalities

whin Metopoltan Manila Area unlike Sec.232 which

mians this qualficabon.

Summary outline of special levy by local

govemment units.Also known as special assessment.

1) On lands specially benefited by public works

pects or improvements;

2) funded by the local government unit,a

3) specia! levy not to exceed sixty percent 60% of

ual cost of project.

4) Exemption:

a) Lands exempt from basic real property tax

b) Remainder cf land donated to local

Govemment unit for the construction of the project.

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（LGC,Sec.240,arrangement and numbenng supplied)

c. Ordinance imposing a special levy. "A tax

ordinance imposing a special levy shall describe with

reasonable accuracy the nature, extent,and location of

the public works projocts or improvements to be

undertaken,state the estimated cost thereof,specify the

metes and bounds by monuments and lines and the

number of annual installments for the payment of the

special levy which in no case shall be less than five(5)

nor more than ten (10)years.The sanggunian

concemed shall not be obliged,in the apportionment

and computation of the special levy, to establish a

uniform percentage of all lands.subject to the payment

of the tax for the entire district, but.it may fix different

rates for different parts or sections thereof,depending

on whether such land is more or less benefited by the

proposod work." (LGC,Sec,241)

Summary outline of ordinance Imposing speclal

levy. The ordinance shall

descnbe-nature, extent, location of project

2) state estimated cost

specify meles and bounds by monuments and

lines,and

4) : the number of annual installments,not less than

five (5) years nor more than ten (10) years. (LGC,Sec.241,

arrangement and numbenng supplied)

d. Imposition of special levy requires publlc

hearing. "Before enactment of an ordinance imposing

a special levy, the sanggunian concemed shall conduct

a public hearing thereon; notify In writing the ownera of

the roal property affected or the persons having logal

interest theroin as to the date and place thereof and

afford the latter the opportunlty to oxpress their

positions or objections relative to the proposed

ordinanco."(LGC.Sec.242)

NOTES AND COMMENTS: The epilogue of Sec.242 seems

to be misplaced. It reads, "Publlcadon of Proposed Ordinance

Imposing a Special Levy" but there are no provisions in the body

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reated to publication The contents of the provision refer to public

peang and notificabon of the pertes alfected.

。Fixing the Amount of Speclal Levy."The special

yauthorized herein shail be apportioned,computed,

Ind assessed according to the assessed valuation of

me lands affected as shown by the books of the

assessor concemed,or its curront assessed value as

fxed by said assessor if the property does not appear

of record in his books. Upon the effectivity of the

ordinance Imposing special levy. the assossor

concemed shall forthwith proceed to determine the

Innual amount of special levy assessed agalnst each

parcel of land comprised within the area especially

benefited and shall send to each landowner a written

notice thereof by mail,personal service or publication

in approprizte cases."(LGC,Sec..243)

L Disposition of the proceeds of the Speclal Levy.

The proceeds of the special levy on lands benefited by

public works,projects and other improvements shall

acerue to the general fund of the local govemment unlt

which financed such public works, projects or othor

improvements."(LGC,Sec.274)

g. Taxpayers' Remedics Agalnst Speclal Lavy.

＂Any owner of real proporty affected by a zpocial levy or

any person having a legal interest therein may,upon

eceipt of the written notice of assessment of the

special levy,avail of tho remedies provided for In

Chapter 3,Title Two,Book ll of this Code." (LGC,Sec.244)

1) Remedy of landowner who does nor agree

with the Imposltion of a speclai levy. The landowner

can appeal to Local Board of Assessment Appeals and

to Central Board of Assessment Appeals as provided in

Secs. 226 to 231 of the LGC.(LGC,Seca.241,242,244)

NOTES AND COMMENTS:Reler to Chapter 4,infta. The

procedure is the same as contesting an appraisal and assessment

of real property.

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MULTIPLE CHOICE QUESTIONS:

1. After the province has constructed a barangay road,

the Sangguniang Panglalawigan may impose a special levy

upon the lands specifically benefitted by the road up to an

amount not to exceed

a. 60% of the actual cost of the road without giving any

portion to the barangay.

b. 100% ol the actual project cost without giving any

portion to the barangay.

c. 100% of the actual project cost,keeping 60% for the

province and giving 40% to the barangay.

d.'60% of the actual cost,dividing the same between

the province and the barangay.(BAR:2011)

SUGGESTED ANSWER: a
2. The City Government of Manila may NOT impose:

3.

Basic real property tax at 2% of the assessed value

of real property:

b. Additional levy on real property for the special

education fund at 1% of the assessed value of real property;

c. Additional ad valorem tax on idle lands at a rate not

exceeding 5°/o of the assessed value;

d. Special levy on lands within its territory specially

benefited by public works projects or improvements funded

by it at 80% of the actual cost of the projects or

improvements.(BAR.2012)

SUGGESTED ANSWER d

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